5 Mar 2024

Government deficit $3.7b for seven months to January

12:37 pm on 5 March 2024
New Zealand Dollar Closeup

Photo: 123RF

The slower economy has started to bite into the government's financial position with a fall in tax revenue.

Treasury figures show a deficit of $3.7 billion for the seven months ended January, fractionally less than forecast in the December financial update.

Tax revenue was $69b - $752 million below forecast - because of lower company, GST, and other tax payments.

"This was attributed to reduced taxable profits associated with both filed and estimated tax assessments as a result of deteriorating macroeconomic factors," the Treasury said in a commentary.

It said GST revenue was down $200m below forecast, "hinting at potential weakness in March quarter consumption".

The Treasury said the overall deficit was also influenced by state owned enterprises making $500m less than forecast because of the scrapping of the new Cook Strait ferries project (IREX), which led to a write down in the value of assets.

Overall government revenue was $76.8b, with the weaker tax take partly offset by above higher than expected interest income from investments.

Expenses were $1b below forecast at $78.6b on lower welfare and floods and cyclone recovery spending, which was partly put down to timing and was expected to unwind. However, the new government's changed transport policies such as the end of the clean car discount scheme contributed to a $200m drop in spending.

Net debt was $2.9b below forecast at $82.9b, equating to 20.7 percent of the value of the economy, boosted by gains on investments held by the Superannuation Fund.

The government will release a budget policy statement on 27 March in which it will detail spending priorities in the forthcoming May budget.

Get the RNZ app

for ad-free news and current affairs